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February 23, 2023
How to calculate freight shipping rates
Do you ever wonder what goes into a freight quote? Is it the distance traveled, fuel prices, your lanes, or the time of year?

The short answer is all the above and more. Thanks to technology, freight quotes can reflect the most current conditions. This is beneficial to you, the shipper, because it means you can be confident you are getting a competitive price.

But when you’re booking a load and a quote pops up on your screen, it can seem like a mystery as to how it was calculated. Below, we shed some light on the subject and share a few of the “ingredients” that go into a freight quote. While every pricing model is different, many include these key variables when it comes to full truckload (FTL) rates.

Ingredient #1: Carrier capacity
What do we mean by “capacity”? We mean the ability to secure and pay for carriers, as well as book reliable carriers to pick up your load and deliver it on time. The more drivers and trucks available, the lower your rates will likely be. Conversely, when you read in the news of driver shortages or truck congestion, that can have an upward pressure on rates as well.

Ingredient #2: Demand
The freight market’s highs and lows correlate to supply and demand. High-demand products often cost more, especially when they are in limited supply. Similarly, how “hot” a lane is and other factors determining your shipment—such as modality, equipment type, weight, and speed—can impact rates. That’s why you often receive higher rates for in-demand lanes.

Ingredient #3: Micro trends
External factors can influence freight costs in the short term. This includes weather, labor shortages, and other political or regulatory events that put upward pressure on rates.

Extreme weather conditions are a great example, because they are a reoccurring phenomenon that impact all parts of the country. Bad weather and snow storms often cause delivery delays, and, depending upon the severity, impact capacity in the affected area.

Ingredient #4: Macro trends
Big picture factors can also influence freight rates in the long term. Freight shipping rates are heavily influenced by macro trends such as the state of the economy (e.g., inflation, recessions, and expansions), fuel prices, product inventory levels, and supply chain issues.

Rates tend to go up with other prices during periods of strong retail sales, as well as increase during strained economic conditions such as inflation. In turn, rates will typically decline with the decrease in consumer spending. That’s because there will be a buildup of inventory and an excess of capacity.

Ingredient #5: Carrier base
Finally, your rate is impacted simply by the carrier you choose. Each one is different and has its own idiosyncratic characteristics that can be advantageous or disadvantageous to prices. These characteristics can include things like where the carrier’s hubs are, the size of its network, equipment type (e.g., tankers, flatbeds, etc.), and how it uses technology to optimize its network.

For instance, you might get a better rate on your load of canned goods from a carrier with a fleet of mostly dry vans compared to the one who specializes in flatbeds.

Amazon Freight = pricing confidence
Corralling all these variables is a challenge, but Amazon Freight factors them in using advanced technology such as AI and machine learning. The combination of our tech and network means we can predict pricing 14 days in advance for spot rates and up to 52 weeks for contracts.

Amazon Freight leverages the Amazon network, so you can capitalize on our lanes and get a competitive price. We also work to build capacity with our 50,000+ trailers and carriers and the Amazon Freight Partner program that helps entrepreneurs start their own trucking businesses.

When it comes to pricing, you can feel confident that we have taken into consideration all of these ingredients. Plus, you’ll enjoy the scale and technology we use for our own network. This allows us to give you prices you can feel confident in and the reassurance that there won’t be surprise costs down the road.

Ready to see what rates are with Amazon Freight for your loads? Create an account and start quoting loads instantly.
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